How to breathe life into plastic cities

By Tom Kaiser

Published: 04.23.2018

Photo by Nicholas Upton

After passing Philadelphia in 2017, Phoenix is now the fifth-largest U.S. city—but you’d never know it from the sidewalks of this largely desolate downtown. Everything in Phoenix is too diffused for any sort of critical mass that gives the best downtowns their zip.

Too few people actually live in central Phoenix, so the sidewalks are depressing after workers decamp for the suburbs every evening. It is one of several Sun Belt cities that are among the fastest-growing metro areas in the country, but whose central business districts are definitely not the place to be for restaurants and retailers.

Phoenix, like many sprawling cities planned after cars became the norm, has limited walkability and is scattered to the point of dilution. Dallas, Houston, Orlando and Atlanta are similarly afflicted, and businesses looking to expand to these places need to deploy a different playbook than they would in traditional cities with compact, dense downtown districts.

Rather than a hub-and-spoke strategy where brands target new cities with a unit downtown and several in the most happening suburbs, landing the best locations in plastic cities like Phoenix means identifying the next up-and-coming areas where spaces are still available and rents are lower than the most active, car-based power centers that are so competitive in this hot economy.

Downtown Phoenix looks pretty, but where are the people?

Cashing in on bedroom communities

These Sun Belt cities are all showing positive momentum, even in their downtowns. Phoenix, Dallas and Houston, in particular, have made impressive investments in civic amenities and mass transit, but the epicenter for retail, restaurants and shoppers in these places are further afield in neighborhoods outside of the downtown office districts.

Walking through Phoenix during the International Franchise Association’s annual convention was not without its charms. Hotels surround the convention center, which itself is new and glassy, but the surrounding streets had limited stores and restaurants for after-hours recreation and necessities. It’s hard to believe this is the seat of power in a metro area of 4.5 million.

As a convention junkie, I know the value of having a CVS and a well-made old fashioned within arm’s reach of a hotel when I’m in town for business. Cities like Denver and Indianapolis do that so much better, outside of the very best cities like Chicago and New York. Doesn’t anybody eat or drink in this town?

Brent Mallonee, a commercial broker for Cushman & Wakefield in Phoenix, said his home city is a “quintessential bedroom community,” but change is afoot as residential developers are beginning to build residential units in and around the city center like so many other U.S. cities in recent years.

“That is rapidly changing as we experience concentrated, hyper residential growth through the normalization of multifamily-style urban living in both the downtown and what we refer to as our ‘urban hot spot nodes,’” he said, earning extra points for the wonky delivery. Mallonee pointed to Biltmore, Old Town Scottsdale, Kierland, midtown, north Tempe and downtown Gilbert areas as examples of hot retail neighborhoods outside Phoenix’s city center.

It’s the same in many of the sprawl-iest cities, where retail concentrates where the people are—which happens to be outside of downtown. Houston has Uptown that’s home to The Galleria; Atlanta has Buckhead; DFW has the shining, new Legacy section of Plano and in Orlando it’s Lock Haven Park and Altamonte Springs.

Most every city has commercial sub-markets, but metros with weak downtowns can be particularly challenging for operators looking to land sites that are prime now or in soon-to-be-gentrifying hot spots.

Mallonee urges brands searching in such cities to be prepared to do multiple deals to seed concepts that are new to town for visibility. He added the quick pace in Phoenix has meant a greater spread in rents that are rising across the board, with the greatest spread between “A locations” with the best traffic and visibility.

Options on the future

Andrew Diamond knows the Phoenix market well as president of Angry Crab Franchise, a local shrimp boil concept that’s quickly grown to six units since it was founded in 2013. Its casual restaurants tend to be in the 5,000 to 6,000-square-foot range, with communal sinks right in the dining room for guests to wash off the remnants of a hands-on meal.

Angry Crab has placed its restaurants in areas where development is approaching, but hasn’t yet arrived. Billing itself as a destination restaurant for blue collar, middle class customers, Diamond says the brand focuses on “second and third generation” real estate that’s often replacing shuttered restaurants.

In the car scouting for future locations, the company strives to learn what areas are up and coming by talking with business contacts, area landlords, commercial brokers and even tracking where new liquor licenses are being requested, which is often public information.

For its location in Goodyear, several miles west of downtown Phoenix, Diamond focused on the building’s proximity to a community college and a strip mall the company heard was about to be redeveloped—which allowed the company to sign a lease that he now estimates is $10 to $15 per square foot less than market value.

“We knew that could be a really good area for us, and if we get into it now we can get rent rates based on the market then, and locked us into a 10-year lease with two five-year options and that rent should be low market in a couple years,” he said. “It’s like I’m betting on the future of a stock that this is going to be a good location.”

Rather than locating in high-value residential neighborhoods or downtown, which Diamond says has several years to go before reaching any sort of critical mass, the company prefers to locate in areas where patrons wearing shorts and flip-flops can feel comfortable, which still allows Angry Crab to attract fancier folks from further flung neighborhoods.

“I don’t think a lot of the blue-collar middle class people would drive up to North Scottsdale because of the increased prices that we would have to charge because of the higher rent,” he said. “It’s important for franchise owners to understand their guest base and make sure they’re in an area that makes sense.”

The art of people prediction

Strolling through downtown Phoenix on a 70-degree day in late winter was a treat for this Minneapolitan. St. Mary’s Basilica, with its beautiful Mission Revival architecture, stained glass windows and palm trees helps give the city a unique flavor, but still there was something missing: people.

Among the tall buildings further west, the architecture is pleasant, but sterile. Gleaming new light rail stations seemed to be waiting for no one aside from a few skateboarders—including one who had so many questions that he trailed me for blocks. The streetscape was similarly desolate around the Arizona State University buildings further north—random Chick-fil-A and Corner Bakery Cafes noted.

It’s a lovely setting for a big city surrounded by mountains and geography that differs from the rest of the country, but there’s nothing to write home about without crowds of people giving it life. With the ongoing water shortages in the American West and last year’s ground stop at PHX due to extreme heat, maybe it’s amazing that anything so vast was built in this corner of the desert—but the only thing missing are people to attract retail and restaurants.

Wherever your brand may roam, be it bustling cities of the north or Sun Belt boom towns, going where the people are is the first step. Taking it a step further, the true experts have learned to predict where they’re going to be in the future, which is where real estate becomes art.

Tom Kaiser, pictured on opposite page, is senior editor of Franchise Times and writes about urban tales in franchising in each issue. Send story ideas totkaiser@franchisetimes.com